Best Second Chance Loans For Bad Credit

Debt can be a vicious cycle, especially if you have bad credit. An unexpected emergency arises and you take on a high-interest personal loan because you simply have no other options. Because of that high interest and your financial difficulty, six months later you end up owing more than you originally borrowed. And the process repeats itself; meanwhile, you find yourself increasingly in debt.

If this sounds like you, the reality is that many lenders will not be willing to consider your loan application. But this isn’t always the case. Even if your credit history isn’t perfect, there are still lenders out there willing to offer you a second chance loan.

Best Second-Chance Installment Loans

Oftentimes, those who don’t have the best credit score end up stuck with payday loans. These loans not only have higher interest rates but also require borrowers to repay them on or before their next payday (hence the name).

Installment loans are different. As their name also suggests, you repay the loan in monthly installments. The payments are often lower than lump-sum payday loans, and the interest rates are much lower as well.

Although installment loans are usually better than the alternative, some loan offers may not be the best. If you have a 60-month loan (5 years) and are being charged interest for 60 months, that can really add up.

To add to their benefits, making payments on time every month will improve your credit scores, meaning future loans will have more favorable terms for you.

Best Second-Chance Short-Term Loans

Another option for second chance loans are short-term loans. Technically, these loans are intended for different purposes than installment loans. An installment loan is usually meant for larger expenses. A short-term loan is meant for smaller expenses. They might be as low as $100 to help you pay for a medical bill. On the high end, these loans could grant you as much as $2,500.

Because they are intended for one-time expenses, you are expected to pay them off in a single payment. Interest rates on these bad credit loans tend to be high, but that also means those with low credit scores will have an easier time attaining approval.

The interest charged on them may seem small because the loan principal is usually small. But they also usually have just a two-week repayment period (since they correspond with your paycheck). If you had $25 of interest on a $200 loan that must be repaid in two weeks, the annual APR would be over 300%.

Best Second-Chance Auto Loans

In addition to personal loans, it may also be possible to attain second-chance financing for a car. In many ways, lenders may be more willing to offer such financing. Thus far, we have mostly talked about unsecured loans, which can be difficult for a lender to recoup in the event you stop making monthly payments.

An auto loan, on the other hand, is a secured loan. To be precise, the car itself secures the loan. That means that if you become delinquent on your payments, the lender can opt to repossess the vehicle. While one would hope such a thing never happens, it does make lenders more willing to lend to those with bad credit. Having this option means the lender will be more able to recoup their funds in such a situation.

From your perspective, not only will that make approval easier, but it may lower your interest rate as well. Interest rates are entirely based on perceived risk, and the possibility of repossession makes that risk lower.

A Second Chance at Financing Is Possible

If you have ever found yourself in a financial pickle after taking on financing, you might think no lender would ever consider you again. Fortunately, that isn’t always the case. There are lenders out there that understand that things happen. Sometimes things don’t go according to plan, but that doesn’t mean you shouldn’t be given another chance.

Of course, if you are looking for a second-chance loan, your interest rate will probably be a bit high. You also may not be approved for a very large loan. But you can flip the script by making your payments on-time and in full.

You Deserve a Second Chance (at Financing)

Although some of us may like to think we can never make mistakes, the reality is that they do happen sometimes. Sometimes those lives can affect our relationships, our mental health, and yes – our finances.

The good news is that even if you find your finances are suffering as a result of some missteps, chances are that all hope is not lost. There are many lenders out there willing to finance personal loans and auto loans, as a second chance.

Because, as they say, we all deserve a second chance.